Water Year Among Driest in California
May 7th, 2021
According to the California Department of Water Resources, the first six months of Water Year 2021 rank among the driest on record.
Natural flow in key Sierra Nevada watersheds this year has been tracking similar to flow amounts experienced in the severe drought years of 2014 and 2015. Reflecting the low stream flows, storage in the largest northern California reservoirs is also well below average and allocations from the State Water Project and federal Central Valley Project are low.
Dry conditions are becoming increasingly familiar in California. The State’s hydrology has been markedly warmer and drier in the 21st century as compared to prior decades. This century has included two multi-year droughts (2007-09 and 2012-16) plus the dry water years of 2020 and 2021. California is experiencing the transition to drier conditions with more erratic precipitation conditions predicted by climate models.
As water scarcity ebbs and flows with the potential for increased occurrence of weather extremes – times of severe drought followed by periods of excessive moisture – California-based Aquaoso is positioned to help farmers, ranchers, investors and lenders better understand the financial risks associated with water availability.
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"We used to be able to look at a piece of property and ask, 'does it have two sources of water'," said Cameron Burford, Aquaoso co-founder. "Asking if the property has two sources of water is no longer enough because allocations are in flux and groundwater restrictions are growing."
Water risk is business risk
Lenders need more information as they seek to manage their financial positions when lending on farm properties. Buyers and their lenders are now asking questions about water quality and availability, which along with climate and soil conditions drives what a grower can plant.
As the groundwater management plans required under the Sustainable Groundwater Management Act (SGMA) are approved by state regulators, knowing how much groundwater will be available on a sustainable basis will be a common question rural appraisers, lenders, investors and growers will ask.
California rural appraisers report a widening gap in land values because of perceived long term water availability as those areas with known challenges are starting to suffer financially as farmland values there stabilize and look to possibly decline. Conversely, areas with more consistent supplies of surface and groundwater have seen increased interest, as reflected in purchase prices and offers.
Do You Need Financing for California Land?
Community West Bank can fulfill the financing needs of farmers and ranchers, offering Farmer Mac loans to those who want to buy or refinance farm or ranch land or kick-start their agricultural business.
For information about available funding for land acquisitions, refinancing, or other lending options for agricultural projects, please contact us to get started.